Buying a new-build apartment from a developer
A guide to the legal traps before you sign a preliminary contract: checking the developer and the land, the building permit, floor area, deadlines, and your mortgage.
Buying an apartment is, for most people in Serbia, the largest investment of a lifetime. When you are buying “square metres on paper”, it is natural to feel both excitement and fear. Forums and social networks are full of stories, and the most common misconception we hear in practice is: “If a notary certifies the contract, I am completely safe.”
This is a dangerous misconception. A public notary guarantees that the same apartment will not be sold twice, but does not check whether the building will be three years late, whether the penalties are fair, or whether the contract contains hidden traps to your detriment.
That is why, before you pay a single euro as a deposit, go through these three key points with your lawyer.
1. Legal due diligence of the developer and the land
Before you fall in love with the computer render of your future living room, we need to check who is building and on what.
Check with the Business Registers Agency and the National Bank of Serbia
The first step is to check whether the developer’s company is active, how long it has been operating, and whether its account is blocked. We are especially cautious with so-called SPV companies — entities set up only to build that one specific building. If that company goes into liquidation after construction is finished, you will later have no one from whom to collect a warranty for hidden defects in the apartment.
What does the cadastre hide?
The real estate folio for the plot on which the building is being constructed is the project’s identity card. We must check whether the developer owns the land or is a co-investor, and whether court disputes, restitution claims, or annotations that could stop construction are registered against the plot.
2. Are the “papers in order”, or do they merely exist?
Developers often use the advertising phrase “the papers are 1/1”. Translated into the language of the law, that must mean the following:
- A final building permit: it is not enough that a permit exists; it must bear the stamp of finality. We check the number of floors with particular care. It happens that a developer has a permit for four floors, but is already selling apartments on a recessed floor or in the attic, with a promise that they have “filed a request to amend the permit”. That is a huge risk for the buyer.
- Confirmation that works have been notified: this is the document proving that the start of construction has been officially reported to the state, and without it the works cannot legally begin.
3. The three biggest traps in the preliminary contract
The preliminary contract is the stage at which the fate of your money is decided. Once you have it notarised and pay the deposit (usually 10% of the apartment’s value), there is no going back without serious penalties.
- Deviation in floor area: a standard contract clause is that the final price is adjusted if, after the building is completed, the floor area differs by more than 2% or 3%. The contract must, however, define precisely how that difference is paid or refunded, so that you are not asked to pay thousands of euros you had not planned for.
- Deadlines and overly broad “force majeure”: an “indicative completion date” must not appear in your contract. The deadline must be a fixed date. Developers also often try to squeeze labour shortages or the slowness of public utilities (the electricity company, the water utility) into “force majeure”. Those are the developer’s business risks and must not be shifted onto the buyer. Penalties for delay must be clearly defined.
- What if the bank refuses the loan? If you are buying the apartment with a housing loan, the preliminary contract must contain a resolutory condition. That means: if the bank refuses the loan for reasons that do not depend on you, the preliminary contract is terminated and the developer must return the deposit down to the last dinar.
The golden rule of buying an apartment: the developer’s legal team, or the agency brokering the sale, has only one task — to protect the interests of the party paying them. The template contracts they offer you are tailored to the developer, not the buyer.
The cost of hiring an independent lawyer to carry out a detailed legal analysis and shape the preliminary contract so that it protects you is measured in fractions of a percent of the apartment’s value. On the other hand, that step can save you from potentially losing a lifetime of savings.
Do not leave the roof over your head to chance.
If you are planning to buy a new-build apartment and want to be 100% legally secure before signing any document, schedule a legal analysis and consultation.